I.R.S. to Allow Tax-Free Merger of Chrysler

Published: September 15, 1998

AUBURN HILLS, Mich., Sept. 14—
The Internal Revenue Service has told the Chrysler Corporation and Daimler-Benz A.G. of Germany that their proposed merger can be completed tax-free to Chrysler shareholders, the companies announced today. Such a ruling is a condition of the merger.

The ruling also allows Daimler-Benz and Chrysler to reduce the minimum number of outstanding Daimler-Benz shares that must be exchanged for the deal to go through, to 75 percent of shares on an undiluted basis from 80 percent on a fully diluted basis. But the two auto makers are still aiming for an exchange of at least 90 percent of Daimler-Benz shares, a requirement to use the more favorable ''pooling of interests'' accounting method for the merger.

Shareholders of both companies are scheduled to meet separately on Friday to approve the deal. Chrysler will hold a shareholders meeting in Wilmington, Del., while Daimler-Benz shareholders will meet in Stuttgart, Germany. Only a simple majority of outstanding Chrysler shares needs to be voted in favor of the merger for it to be completed. Final approval is expected to come from the boards of both companies sometime after the meetings.

Daimler-Benz shareholders will have until Oct. 23 to exchange their shares for shares in the new company, to be called DaimlerChrysler.

Officials hope to have the merger completed by late November or early December.